Wall Street continues to point down, after the loud thud of the eve. Yesterday, the Dow Jones Industrial Average closed at its lowest level since March 2021, sinking 1,164.52 points, or -3.57%, to 31,490.07. The S&P 500 suffered a 4.04% plummet, while the Nasdaq Composite plummeted 4.73%. For the Dow Jones, this was the strongest collapse since June 2020; same thing for the S&P 500.
At about 4 pm Italian time, the Dow Jones loses about 438 points (-1.39%) to 31,051; the S&P 500 retreated 1.06% to 3,880, while the Nasdaq fell 0.76% to 11,330. The S&P 500 closed yesterday at an 18.6% lower value from the intraday record tested in January and down about 18% from the closing high. The index continues to flirt with the bear market condition, which would arise when it closed at 20% or more below its all-time high. A slide in the bear market would be the first since March 2020, when the alarm of the Covid pandemic rang out around the world.
“The trend confirms the narrative that … we are headed significantly further down before we find the bottom,” said Scott Minerd, CIO – head of global investment – at Guggenheim Partners.
In an interview with Marketwatch, Minerd presented a nightmare scenario, which would materialize this summer, and which would lead the Nasdaq Composite Index to capitulate to a value well below -75% compared to the record tested on November 19, 2021. (at the moment, in the bear phase, the index is trading lower than that peak of 28%).
The ordeal of the US stock exchange, in short, at least for Scott Minerd, would only be at the beginning, destined to worsen and following a dynamic “very similar to that of the collapse of the Internet bubble”, therefore to that of the bursting of the speculative bubble on technology stocks that it occurred in 1999 and early 2000.
Not everyone is so pessimistic: Deutsche Bank analysts have announced they believe the S&P 500 will drop to 3,650, suffering a 24% drop due to the slowdown in the economy. However, according to analysts of the number one bank in Germany, the US job market will not be particularly affected by the crisis, remaining solid.
Consequently, in their view, the S&P 500 index will then mark a recovery that will bring it back towards 4,700 / 4,800 at the end of the year from the current 3,923.
But will it be a recession in the US or not? Here too the views are different.
In the last few hours, the analysts of JPMorgan announced that they have revised down the estimates on the growth of US GDP for the second half of 2022 and 2023. The economic research division of the American banking giant now expects GDP to expand, in the second half year of 2022, equal to + 2.4%, compared to the + 3% previously expected.
For the first half of 2023 the estimates were cut from + 2.1% to + 1.5% and for the second half of next year from + 1.4% to + 1%.
The note states that JP Morgan is practically forecasting a soft landing for the US economy, i.e. a slowdown in growth that should gradually increase unemployment in 2023 and translate into a decrease in wage growth. (thus bringing down inflation).
But there are many other economists who fear a recession instead.
The news that arrived today from the macroeconomic front is certainly not comforting.
In the week ending May 14, the number of American workers applying for unemployment benefits for the first time rose by 21,000, to 218,000, a record for the past four months. The figure was worse than the 200,000 expected. The four-week moving average settled at 192,750, more than the 188,500 predicted by the consensus. However, the solidity of the labor market is not called into question, at least in the short term. Much more worrying is the trend of the Philly Fed index, the index that monitors the conditions of the Philadelphia manufacturing area. The index sank to 2.6 points in May, from 17.6 in April, far below the expected 16 points, the lowest since May 2020.
Among the titles, Tesla is highlighted, which in the premarket retreats more than 2% after the news that provoked the wrath of the founder and CEO Elon Musk (among other things in controversy with the top management of Twitter, the microblogging platform on which it submitted a $ 44 billion takeover offer).
Tesla was cut out of the S&P 500 ESG Index due to various problems, including complaints of racial discrimination and accidents related to its self-driving vehicles.
The S&P 500 Esg Index is a basket of stocks that tracks the main Wall Street index for industrial sectors, but selecting the companies most in line with the environmental, social and governance (ESG) criteria generally recognized in the market.
Musk’s response was not long in coming, and he responded with harsh tweets, including that “ESG is a scam”. Tesla travels to the new lows of 2022 (-41% YTD). The stock falls by approximately 1.80%.